A wide variety of proteins in neuronal, endocrine and immune tissues undergo proteolytic processing. Many of the resulting peptides are intercellular messengers. Neuroendocrine peptides are synthesized from precursor proteins. Post-translational processing of these precursors is a key step in the production of biologically active peptides. In the majority of cases this occurs by proteolysis of the precursors at `classical' cleavage sites by prohormone convertases. However, in a subset of cases bioactive peptides are generated by processing at `non-classical' cleavage sites. The peptidases responsible for these cleavages are not well explored. During the previous funding cycle we identified endothelin converting enzyme 2 (ECE2), a metallopeptidase, as a potential candidate since it exhibited functional properties that are consistent with such a role. Recently we found that ECE2 processes peptides in an endocytic compartment and this, in turn, affects receptor trafficking and signaling. This is intriguing since it raises a novel role for endosomal non-classical peptide processing in the modulation of receptor function. In this application we describe studies, using the opioid peptide-receptor system as a model, to systematically examine the emerging area of endocytic peptide processing by ECE2 and its impact on the activity of opioid receptors. Specific studies are: Aim 1. To establish a role for ECE2 in regulating opioid receptor recycling and resensitization, Aim 2. To explore the functional consequences of peptide processing by ECE2, and Aim 3. To investigate the role of ECE2 in opioid receptor function in biological systems. These studies are highly significant since they question the dogma in the field that the action of the neuropeptides are terminated following endocytosis; we raise the intriguing possibility that some biologically active neuropeptides are generated post endocytosis and this affects the type and extent of signaling. These studies are also likely to have a high impact since we describe studies to generate pharmacological profiles for endogenous opioid ligands by defining their functional selectivity - an emerging area of research in the field. Finally, these studies will make a fundamental contribution by identifying novel pathways that regulate neuropeptide levels in vivo, thus opening novel therapeutic possibilities for the treatment of a variety of neuroendocrine disorders.